It's time for the regulators to go undercover
I KNOW it's fashionable to accuse New Labour of dragging its feet on important issues, but (sorry to spoil the party) it's not true. The Government - or rather Chancellor Gordon Brown - has positively sprinted into action on financial services reform. The new Treasury team moved into its offices in May 1997. Just 18 months later the Queen travelled to Canary Wharf to open the swanky new offices of the Financial Services Authority (FSA). This new super-regulator will employ 2,000 and oversee the people who work in the City, for insurance companies, banks and building societies, as well as the financial adviser who flogs you a PEP. It's a one-stop regulation shop - courtesy New Labour.
The FSA is up and running now as a single point of contact for consumers, but it will get its full powers in 2000. Industry watchers are extremely confident that the Queen's Speech this week will include the Financial Services and Markets Bill, the framework for the FSA's operation. If so, it will keep the momentum going at a cracking pace.
You may also recall life insurers and independent financial advisers being called into the Treasury to be "named and shamed" over the pensions mis-selling disaster. All this and the plans to introduce individual savings accounts (ISAs) next April. Do these people sleep?
Consumer groups have broadly welcomed the changes. But the Consumers' Association warns we can't be complacent. It points out that life companies and financial advisers got away with their negligent sales practices within the existing regulations; there were plenty of rules in place, but they were the wrong ones.
The regulators were (and are) process-driven: they check form filling, letter writing and sometimes they make inspections on company premises. The culprits quickly learned to keep the paperwork in order, so the mis- selling went unchecked for six years.
People believe what they are told, not what they read on a piece of paper full of small print. The Consumers' Association suggests sending FSA staff on "mystery shopping" expeditions - where they pose as ordinary customers. This would be a more effective way to spot when consumers are being badly advised, misled, or simply sold stinking rubbish in the name of financial services.
Those busy people in the Treasury should take note - and they really need to get out more. Mystery shopping trip, anyone?
i.berwick@independent.co.uk
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